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DeFi and Tokenomics on WAX:

WAX has created a new tokenomic model that marries the explosive growth of NFTs with the superior monetization capabilities of DeFi. The core element of the new WAX tokenomics system is its inter-blockchain design.

Below are the details of the implementation including a summary of the new tokens, token mechanics, distribution, governance, and more. This is a technical document. For a summary of the steps required to participate in the WAX DeFi model, click here.

Definitions:

• WAX Blockchain: a purpose-built blockchain that uses Delegated Proof of Stake (DPoS) as its consensus mechanism, designed to make NFT transactions faster, easier, and safer for all participants
• WAX NFT: a non-fungible token that trades on the WAX Blockchain
• WAX Cloud Wallet: the WAX Blockchain’s native wallet that stores WAXP Tokens and WAX NFTs. Accounts can be created in just two clicks
• WAX Network Fees: 2% fees collected by WAX-powered secondary markets on sales of NFTs
• WAXP to Ethereum bridge: a new bridge that will enable WAXP token holders to convert their tokens into WAXE.
• WAXE: a new Ethereum ERC20 utility token. A WAX Token holder wanting to participate in the WAX tokenomics will burn their WAXP tokens to receive WAXE (using the Ethereum bridge) and then deposit WAXE and ETH into WAXE-ETH Liquidity Pool.
• WAXE-ETH Liquidity Pool: a liquidity pool for the WAXE-ETH trading pair. Those who deposit a combination of WAXE and ETH into the liquidity pool will earn the WAXE-ETH Liquidity Pool token.
• WAXE-ETH Liquidity Pool token: the ERC20 token that’s received when depositing WAXE and ETH into the Liquidity Pool. The Liquidity Pool token can be staked in the WAX Economic Activity Pool to earn two types of rewards: WAXG and ETH.
• WAXG: a new Ethereum ERC20 Governance Token. WAXG will be given to those who stake their WAXE-ETH in the WAX Economic Activity Pool. You can then do one of two things with your WAXG: burn WAXG and receive ETH from the PiggyBank pool in exchange, or vote with them to adjust Governance parameters.
• WAX Economic Activity Pool smart contract on Ethereum (WEAP): this smart contract will govern two different economic activity pools, PiggyBank and Distribution Pools, as well as, rewards distributions and WAX DeFi Governance.

We want all Worldwide Asset eXchange™ participants to benefit from the economic activity taking place on the WAX Blockchain.

The WAX Blockchain is the “King of NFTs” and we want to share the success of NFT activity and future economic activity growth on WAX with WAX Token holders. To do this, we feel that the success of WAX Blockchain economic activity will be best captured and expressed on the best blockchain monetary system - Ethereum.

Not all blockchains are created equal, which is advantageous to the space since it creates diversity and enables different blockchains to excel based on their different use cases. The WAX Blockchain is purpose-built for NFT transactions and is the top performing blockchain in the NFT space, while Ethereum is the de facto best monetary blockchain system. Therefore in order to allow all WAX participants to benefit from the economic activity generated from NFT transactions on the WAX Blockchain, WAX is creating additional token instruments to allow WAX's economic activity to be expressed on the Ethereum monetary system. This will be applied to future and past NFT transaction activity (including secondary market sales for Topps GPK, William Shatner, and all other participating NFT sales that occur prior to the implementation of this model).

So how will the WAX Blockchain's economic activity leverage the Ethereum blockchain?

Until now the WAXP Protocol Token, which is transacted on the WAX Blockchain, expressed only the utility value of the WAX Blockchain. As new business lines develop and economic activity expands and diversifies on WAX, there is a need to express WAX’s economic activity via Ethereum-based (ERC20) tokens. This will be accomplished through the creation of three new Ethereum based (ERC20) tokens:

1. WAXE ERC20 Token. The WAXP token will be convertible into the WAXE token at a ratio of 1000:1. That is, 1,000 WAXP tokens can be converted into 1 WAXE token.
2. WAXG ERC20 Token. This governance token will be used to vote on the distribution and allocation of the WAX Blockchain's economic activity.
3. WAXE-ETH Liquidity Pool ERC20 Token. This is received when depositing WAXE and ETH into the Liquidity Pool. The Liquidity Pool token can be staked in the WAX Economic Activity Pool to earn two types of rewards: WAXG and ETH.

The WAX Blockchain's economic model is based on the buying, selling, and trading of NFTs that are created and transacted on the WAX Blockchain. In order to conduct most of these NFT transactions, participants need WAXP Tokens. One way to acquire WAXP is to purchase them on exchanges.

The WAXE and WAXG Token mechanisms will ensure that existing and future WAX NFT participants have access to the leading exchanges on the best monetary blockchain system - Ethereum.

Name: WAX Economic Token

Symbol: WAXE

Decimals: 8

Token Contract Address: 0x7a2Bc711E19ba6aff6cE8246C546E8c4B4944DFD

Maximum supply: 3,700,000 WAXE (3.7 million)

Initial Supply: 3,700,000 WAXE

Inflationary (mintable)? No

Deflationary (burnable)? No

Name: WAX Governance Token

Symbol: WAXG

Decimals: 8

Token Contract Address: 0xb140A429c342083E97Daf42d5D82634bd7Ade7d4

Maximum supply: 10,000,000 WAXG (10 million)

Initial supply: 10,000,000 WAXG

Inflationary (mintable)? No

Deflationary (burnable)? Yes

Name: Uniswap Liquidity Pool WAXE-ETH Token

Symbol: UNI-V2 WAXE-ETH

Decimals: 18

Token Contract Address: 0x0ee0cb563a52ae1170ac34fbb94c50e89adde4bd

How are WAXE Tokens created?

WAXE Tokens are created in two ways:

1. Economic Activity Swap: When WAX NFTs are bought and sold on WAX-powered secondary markets, these transactions collect network fees of 2% in the form of WAXP Tokens. Of the total number of WAXP Tokens collected for Economic Activity Fees:

• 20% of the WAXP Tokens will be burned creating a deflationary tokenomics mechanism on the WAX Blockchain.
• 80% of the WAXP Tokens will be swapped for WAXE Tokens at a ratio of 1000 WAXP to 1 WAXE. These WAXE Tokens are then funneled into the WAX Economic Activity Pool (WEAP).

2. Token Holder Swap: WAXP Token Holders will be able to obtain WAXE tokens by swapping their WAXP tokens for WAXE tokens or purchasing them on an Ethereum exchange. The WAXP tokens that get swapped for WAXE tokens will be burned, creating an additional deflationary tokenomics mechanism on the WAX Blockchain.

How are WAXE-ETH Tokens created?

WAXE-ETH Tokens are created when WAXE and ETH are deposited into the WAXE-ETH Liquidity Pool.

How are WAXG Tokens created?

WAXE-ETH Token holders who stake their tokens in the WEAP will receive a drop of WAXG Tokens every two weeks.

Gas fees using the WAX to Ethereum Bridge

Operations on Ethereum require gas fees. Users will pay the gas fees required to complete the following operations, based on the quoted Ethereum gas fee at that time:

• Claiming WAXE after using the ETH Bridge to burn WAXP
• Depositing WAXE and ETH into the WAXE-ETH Liquidity Pool
• Staking WAXE-ETH into the WAX Economic Activity Pool
• Claiming rewards

WAX Blockchain economic activity fee, captured as WAXP in the Economic Activity Accumulator, is converted to WAXE Tokens (drawn from the total supply) and will be distributed in the form of Ethereum to WEAP participants. Within the WEAP, there will be two different smart contracts:

• Distribution Contract: the percentage of the WAXE Tokens in the WEAP (initially 50%) that will be converted to ETH for distribution to Liquidity Pool WAXE-ETH Token Holders who stake their WAXE-ETH Tokens in the WEAP.
• PiggyBank Contract: the percentage of the WAXE Tokens in the WEAP PiggyBank Pool (initially 50%) that will be perpetually converted to ETH for distribution to WAXG Token holders who choose to burn their WAXG Tokens in the WEAP Smart Contract.

WAXG Token holders will be able to cast votes to govern the allocation and distribution of the WEAP.

WAXG Token holders will be able to vote on the following parameters of the WEAP:

• Burn % is the percentage of Economic Activity Fees (WAXP) that gets burned before the remainder is transferred to the WEAP. Initially, this is 20%.
• Distribution % is the percentage of WAXE Tokens from the Economic Activity Fees that get deposited into the WEAP’s Distribution Contract. Initially, this is 50%.
• PiggyBank % is the percentage of WAXE Tokens from the Economic Activity Fees that get deposited into the WEAP’s PiggyBank Contract. Initially, this is 50%.
• There may be additional governance parameters as the system is developed (ie: implementation of different liquidity pools, or the length of staking periods)

A liquidity pool for the WAXE-ETH trading pair. Those who deposit a combination of WAXE and ETH into the liquidity pool will earn the WAXE-ETH Liquidity Pool tokens. For example, if you would like to supply $1000 to the WAXE-ETH pool, you would need $500 WAXE and $500 ETH, plus some extra ETH to cover gas costs.

The WAX Economic Activity Accumulator is a third generation blockchain tokenomics mechanism that allows for the capture and distribution of network fees that result from various different economic activities taking place on the WAX Blockchain.

To begin with, there will be one Economic Activity Accumulator tied to the WAX Blockchain’s economic activity that results from the creation, buying, and selling of NFTs. However, once new economic activities emerge, then they may result in the creation of their own Economic Activity Accumulator.

We envision that over time the following economic activity accumulators will exist on the WAX Blockchain:

1. NFT Economic Activity Accumulator: accumulating all NFT network fees and any other fees related to creation, trading, buy and selling of NFTs (same as the inaugural Economic Activity Accumulator).
2. Ethereum Bridge Economic Activity Accumulator: accumulating all withdrawal fees collected when WAX-wrapped ERC20 altcoins are moved from the WAX Blockchain to Ethereum.
3. DEX Economic Activity Accumulator: accumulating all exchange fees resulting from microtransactions of WAX-wrapped ERC20 altcoins taking place on the WAX Blockchain’s decentralized exchanges.

Other Economic Activity Accumulators will likely be developed as the WAX Blockchain ecosystem matures and new business opportunities emerge. All accumulated fees will be funneled into WAX Economic Activity Pools on Ethereum by exchanging WAXP for WAXE tokens with 1000:1 ratio (as described above). A portion of all economic activity accumulated will be burned before the transfer in accordance with the governance rules voted on by WAXG Token holders.

A Summary of the WAX Economic Activity Pool (WEAP):

• The WEAP smart contract on Ethereum will govern two different contracts, Distribution and PiggyBank.
• The non-burned portion of WAXP Tokens from the Economic Activity Accumulators on the WAX Blockchain will be converted into WAXE tokens, and then deposited into the WEAP’s Distribution and PiggyBank Contracts in accordance with the governance rules determined and voted on by WAXG Token holders.
• The initial distribution percentage of the WEAP will be 50% to the Distribution Contract and 50% to the PiggyBank Contract.
• WAXE Tokens in the Distribution and PiggyBank Contracts will be converted into ETH for distribution to participants of the WEAP pool.
• WAXE-ETH Token holders will need to stake their WAXE-ETH Tokens into the WEAP in order to be eligible for distributions from the Distribution Contract in the form of ETH.
• Those who stake WAXE-ETH Tokens in the WEAP will also receive a drop of WAXG Tokens every two weeks.
• WAXG Token holders will have to burn their WAXG Tokens in the WEAP in order to receive a one-time distribution from the PiggyBank Contract in the form of ETH. The WAXG burn will permanently reduce the supply of WAXG Tokens.

WAX Economic Activity Pool (WEAP) smart contract is an integral part of the WAX DeFi implementation. It facilitates collection of WAX Economic Activity Fees collected on the WAX Blockchain as WAXP utility tokens and then emitted to Ethereum via the WAX to Ethereum Bridge while being converted to ERC20 WAXE with 1000:1 ratio (1000 WAXP = 1 WAXE).

WAX Economic Activity Fees converted to WAXE are then deposited into WEAP into two different value pools: PiggyBank Pool and Distribution Pool. The deposit ratio into each pool is determined by the WAX DeFi Governance mechanism, which is governed by WAXG Tokens. The initial deposit ratio will be to distribute 50% of the emitted WAXE tokens into the PiggyBank Pool and 50% to the Distribution Pool. This ratio may change in the future once the WAX DeFi Governance proposal and voting process is put in place.

The PiggyBank Pool is designed to perpetually accumulate economic fees collected. The mechanism allowing WAX DeFi users to receive a portion of these fees will require WAXG Token holders to burn their WAXG tokens in the WEAP.

The Distribution Pool is designed to distribute all of the accumulated fees on a periodic basis. Only Liquidity Providers who provided liquidity into WAXE-ETH Uniswap Liquidity Pool, received their Liquidity Pool WAXE-ETH ERC20 tokens and then staked them into the WEAP will be eligible to receive Distribution Pool rewards. WAX DeFi users who acquired WAXE-ETH tokens on exchanges will also be able to participate in the Distribution Pool rewards by staking these tokens into the WEAP.

WAXG Tokens can be obtained by the Liquidity Pool providers who (1) provided liquidity into WAXE-ETH Liquidity Pool, (2) received their Liquidity Pool WAXE-ETH ERC20 tokens, and then (3) staked them into the WEAP. Similarly to Distribution Pool rewards, WAX DeFi users who acquired WAXE-ETH tokens on exchanges will also be able to participate in obtaining WAXG emissions by staking these tokens into the WEAP. Finally, WAXG tokens could be obtained from exchanges.

Staking Epoch Requirements:

Staking Epoch is a mechanism in WEAP that introduces a minimum period of time that Liquidity Pool WAXE-ETH Tokens must be staked in the WEAP to be eligible for both WAXG emission and Distribution Pool rewards. Similar mechanism has been used by Kyber DeFi for example to ensure that there is a strong incentive for tokens to be staked in order to be eligible for voting or other rewards. We model our Staking Epoch implementation in a similar way, as we believe staking for a period of time is beneficial to WAX DeFi as it will minimize unnecessary unstaking/withdrawals of WAXE-ETH from WEAP.

WAX DeFi Staking Epoch is defined as a 2 week period. Every new epoch starts every two weeks on Wednesdays 10:00 am PST with the first epoch starting on Wednesday, December 22nd 2020 at 10:00 am PST and the second staking epoch starting on Wednesday, January 6th 2021 at 10:00 am PST and so forth.

WAXG Emission Requirements:

WAXG emission should be based on the following algorithm:

1. In order to be eligible for staking rewards one must deposit WAXE-ETH Tokens before the beginning of the Staking Epoch. Deposits made during a Staking Epoch will be eligible for distribution in the next Staking Epoch. No partial staking rewards will be given; stakers must keep their WAXE-ETH staked for the full duration of the Staking Epoch to be eligible for WAXG emission.
2. WAXG emission should be based on a four year timeline (208 weeks). Since the Staking Epoch is roughly 2 weeks, there should be 104 WAXG emission events.
3. WAXG emission events should only be triggered if the price of WAXE stayed the same or increased in any given staking epoch. If the price of WAXE as of the last staking epoch block is lower than the price of WAXE as of the first block in the staking epoch then no WAXG distribution should take place.
4. Once WAXG distribution is triggered, then 48076.92307692 (10 million supply / 104 emission periods * 50% - supply will be locked for the WAX Foundation) WAXG should be proportionality distributed to all WAXE-ETH stakers.
5. Additional Liquidity Pools supporting other currencies in addition to ETH maybe supported in the future. If new Liquidity Pools are introduced then each may receive a specific weight to be able to tailor the distribution between the different Liquidity Pool Tokens staked. This weight maybe based on the Liquidity percentage that each new Liquidity Pool provides into the overall WAX DeFi ecosystem.

WAXP tokens that are scheduled for burn are first deposited into escrow burn.wax account. The burn process is executed at the begininng of every wax staking epoch; all token(s) balances (s) on burn.wax account account are then destroyed reducing token's total and circulating supply. This mechanism introduces a deflationary mechanism into the wax blockchain tokenomics model.

There are two sources of WAXP Token burn:

1. WAX DeFi Governance determines the portion of the WAX Network Fees collected that need to be burnt before its conversion to WAXE tokens and allocation into the WAX Economic Activity Pool (WEAP). Currently 20% of all WAX Network Fees collected are designated for token burn; this percentage maybe adjusted in the future by WAXG Token holders through WAX DeFi Governance voting process.
2. WAX ETH Bridge: All WAXP tokens being converted via WAX ETH Bridge to WAXE are scheduled for token burn.

Members of the Genesis Block Member program enjoy GBM rewards, earning 33% of their initial staked tokens per year. This rewards mechanism will expire in June 2022.

If GBM members wish to participate in the WEAP Rewards system, they’ll need to unstake their GBM tokens and swap them for WAXE Tokens.

December 2020:

• Swap WAXP for WAXE Tokens
• WEAP smart contract goes live, allowing WAXE-ETH Token holders to stake their tokens
• WAXE-ETH Token holders who stake their tokens in the WEAP will receive a drop of WAXG Tokens
• Distribution pool smart contract goes live: receive ETH every two weeks for staking WAXE-ETH in the WEAP

Q1 2021:

• PiggyBank Contract goes live: receive ETH from burning WAXG in the WEAP
• WAXG Token holders can cast votes to govern the allocation and distribution of the WEAP

2021:

• Bi-directional Ethereum Bridge supporting USDT and other altcoins deposits and withdrawals to and from WAX Blockchain
• Bi-directional Ethereum Bridge supporting ERC721 and ERC1155 NFTs, to be moved between Ethereum and WAX Blockchains. Ethereum-based tokens will be mapped onto Atomic Assets standard on the WAX Blockchain. Finally, WAX Blockchain-based assets based on Simple Assets or Atomic Assets standards will be mapped onto ERC1155 standard on Ethereum, allowing such assets to be moved to the Ethereum blockchain.